SYNDICATED LOANS

AM | @MackinlayEuruni

Syndicated loans are very large loan agreements entered into by several banks with just one client under the same conditions. A syndicated loan agreement simplifies the borrowing process as the borrower uses one agreement covering the whole group of banks and different types of facility rather than entering into a series of separate bilateral loans, each with different terms and conditions. Example: German software giant SAP wants to acquire Hewlett-Packard. [QUESTION: WOULD THAT REQUIRE A LARGE LOAN?] What can Credit Suisse do? Syndicated loans! "We help arrange syndicated loans at fair market rates and place them with third-party banks. After the transaction is executed, we also handle the administration (as agent bank) for you". We can underwrite syndicated loans for confidential transactions and place them at our own risk. Income for the bank: interest income on the loan plus arranger's upfront and annual fees.

Info. From the Credit Suisse website on Corporate Finance. See also: Guide to Syndicated Loans.

Balance sheet. Assets.

Type. Secured / unsecured.

Maturity. Medium- to long-term.

Type of banking. Corporate banking.

An Example from Citigroup. Citigroup is lending Koch Industries $11 billion to help finance its proposed $13.2 billion acquisition of Georgia-Pacific Corp., according to The Financial Times. The report said the financing is believed to be one of the largest loans on record by a single bank. Citigroup is not likely to put up all of the money once the deal is inked. Rather, it is likely that the financial giant will syndicate the loan to other banks. In the first nine months of this year [2005], global syndicated loan volume surged 28.3 percent, to $2.3 trillion, compared with $1.9 trillion in the prior year period, according to Thomson Financial. A major reason for the strong growth is merger activity, noted Thomson officials. The largest syndicated loan arranged this year was a $24 billion package extended to Procter & Gamble, reported Thomson, followed by a $20 billion syndication put together for GECC Capital Markets Group, and Volkswagen AG's $15.3 billion loan, said Thomson.
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